What is frustrating is that we are also expected to pay for the privilege of helping our accountants and lawyers get up the learning curve—the meter runs while you educate your advisor about your business and the problem at hand. Being paid to learn your customer’s wants and needs is a very nice gig if you can get it (I should know—I used to practice law). Unfortunately, most of us must invest our own resources in understanding the client—with no guarantee we will actually land the sale.
Recently, I was the dinner speaker for a meeting of the partners and managers of a major accounting firm who had gathered to learn about attracting and retaining entrepreneurial clients. I applauded them for understanding that entrepreneurs are different from their large corporate clients. Then I suggested they needed a different billing model for business owners. I proposed a fixed-price model that included certain basic services, such as preparation of annual financial statements, corporate and personal tax planning, and the provision of basic advice from time to time; additional services could be purchased Ã la carte from a standard menu.
Included in the annual fee would be the time the accountant spent visiting the entrepreneur’s place of business, if not her home, in order to better understand the operator’s particular circumstances. Frankly, it would be a welcome change to meet a professional who insists on spending time to learn about the client without the meter running. This could not only be part of the advisor’s initial sales pitch but also a business-development tactic that would help identify additional client needs that could be provided at extra cost.
My idea sank like a stone. These accountants were locked into the traditional hourly billing model. They did not empathize with the typical business owner, who bootstraps his company, spends frugally and looks for ways to create value for his clients—on his own dime.
The same billing model could apply to lawyers. In fact, my law-school classmate, Bob Aziz, senior vice-president and assistant general counsel of TD Bank Financial Group, has redefined the bank’s billing relationships with its various law firms in order to reduce costs. He has imposed a similar billing model on TD’s 110 external law firms.
Still, despite being a marquee account, TD encountered a ton of resistance to the changes. Imagine what an entrepreneur is up against. By their nature, entrepreneurs come up with innovative ways to solve their problems. Perhaps we should approach professional advisors with the same creativity. One idea is to hold a beauty contest among competing suppliers, insisting that they get to know your business and industry before you retain them. Ask them for proposals, pitting them against each other with the request that they come back with a fixed-cost approach. Many professionals, particularly those with the big firms, may scoff at the idea. However, there are some small, entrepreneurial firms that will respond favourably.
Here’s a little reassurance for professional services providers. The revenue of my investment-management firm, Secutor Capital Management, comes from commissions on the investments we sell or the fees we receive for managing the assets of our clients, who are mostly entrepreneurs.
Still, we spend a lot of time getting to know the client and her business without receiving direct remuneration for that effort. We do it because we believe we must understand the entrepreneur’s personal and corporate situation in order to provide good investment-management advice. Furthermore, the better we understand our client and his company, the more reliant he becomes on us. We end up getting a broader range of business from the client. We also help him decide which lawyer, accountant or other advisor he might see for a particular issue. For example, if we recommend that a client set up a family trust, we are likely to introduce her to the lawyer who will do the documentation. Not only do we control the relationship with the client, but we also get referrals back from the lawyer.
More important, this approach builds deep relationships with three positive outcomes: 1) we are the first call when an issue arises, which further builds trust and cements the relationship; 2) the relationship becomes a long-term relationship; and 3) we generate more revenue since we garner more of the client’s total business. It’s proof positive that professionals can increase their billings by billing less.
So, who ya gonna call? An advisor who charges you for learning what you need, or one who takes a more holistic approach to your business?